Output climbed 7 percent to 55.5 million metric tons last
quarter from 52 million tons a year earlier, London-based Rio
said today in a statement, in-line with the 55.7 million-ton
median estimate of five analysts surveyed by Bloomberg.

Rio cut cash costs by more than $2 billion and halved
exploration spending across its suite of commodities to $948
million last year, beating the targets set by Chief Executive
Officer Sam Walsh after he replaced Tom Albanese in February
following failed aluminum and coal deals. The cuts came even as
production of iron ore, thermal coal and bauxite rose to
records, Walsh said.

“What Rio is trying to articulate is that it’s delivering
on its promises, it has a very solid business and it’s leveraged
to the iron ore price,” said Peter Esho, chief market analyst
at Invast Financial Services Pty. in Sydney.

About 4,000 jobs have been cut since June 2012, contractor
agreements are being renegotiated to lower labor costs and
replacement parts for some equipment are being sought from
cheaper suppliers in emerging markets rather than original
manufacturers, Chief Financial Officer Chris Lynch said last
month in a meeting with investors. Rio had 71,000 employees
globally in 2012.

China Demand

China, the world’s biggest buyer of raw materials,
increased iron-ore imports 10 percent last year, peaking at a
monthly record in November as demand held up amid slowing
economic growth. Walsh that month approved a 25 percent
expansion of iron-ore operations in Western Australia that
Liberum Capital Ltd. estimated would cost $2 billion.

Rio advanced 2.1 percent to A$65.58 in Sydney, leaving it
little changed over the past year. The price of iron ore for
delivery to the Chinese port of Tianjin increased 2.1 percent in
the fourth quarter from a year earlier, averaging $134.85 a dry
ton.

The price fell to a six-month low on Jan. 14, dropping
below $130 a ton for the first time since August on expectations
Chinese demand will slow before the Lunar New Year holiday and
as Goldman Sachs Group Inc. forecast further declines. Walsh
said in an interview last month he expects prices to drop this
year.

Iron Ore

A surplus of supply will emerge in the second quarter as
production outweighs demand, Goldman Sachs said Jan. 12,
predicting prices will average $108 a ton this year. Credit
Suisse Group AG said Jan. 6 it expects a “significant
correction” as miners including Rio and Fortescue Metals Group
Ltd. push the worldwide glut to 42 million tons this year.

Rio is the biggest exporter of the steelmaking ingredient
after Brazil’s Vale SA, generating $24 billion in sales of the
raw material in 2012 primarily at its Australian operations.

China is the biggest buyer of iron ore, representing about
60 percent of global demand. The nation’s gross domestic product
may have expanded 7.6 percent in 2013, the slowest pace in 14
years, according to a State Council report in late December.
Growth may fall to 7.4 percent in 2014, the median estimate of
48 economists in a Bloomberg News survey showed last month.

Walsh told investors in London last month that Rio had
completed a drive a month ahead of schedule to trim annual costs
by $2 billion. The initiative is part of a wider objective to
reduce expenses $5 billion over two years, a plan where Rio now
has “rolling momentum,” Walsh said in a December interview.

Production Records

“These actions, together with lower capital expenditure in
2013 and beyond, will ensure that Rio Tinto is well positioned
to deliver greater value to shareholders,” he said today in the
statement.

Rio’s attributable thermal coal production was a record
26.8 million tons in 2013, up 12 percent from the year before.
Production of bauxite, used to make aluminum, climbed 10 percent
to a record 43.2 million tons.

Rio produced 173,000 tons of mined copper in the quarter,
up 5 percent on a year earlier, beating the 139,000-ton median
estimate of three analysts surveyed by Bloomberg. Refined copper
output fell 6 percent to 81,000 tons.

Recovery of operations at the Bingham Canyon copper mine in
Utah is progressing “better than originally planned,” after
the site suffered a pit wall failure in April, the company said.